Draft Independent Review of City Compensation

February 27, 2018by Rick Cole

Last year, a “free-market” think tank published a scathing attack on Santa Monica’s pay scales. Ensuing media coverage and social media discussions included errors and exaggerations. To clear the air, I recommended that the firm that independently does functional auditing do a comprehensive review of our compensation practices. I also recommended we appoint a seven member ad hoc committee of citizens to provide input on the study scope and ultimate recommendations. The Council Audit Subcommittee and the City Council approved those recommendations and the draft of the final report has been released ahead of the next meeting of the Council Audit Subcommittee on Wednesday, February 28.

The report was informed by interviews with staff and labor unions, from published data, surveys and interviews of eleven peer cities:

Anaheim

Beverly Hills

Burbank

Culver City

El Segundo

Glendale

Inglewood

Pasadena

Redondo Beach

Santa Barbara

Torrance

Berkeley and Palo Alto also participated in interviews to provide perspectives on leading practices in other innovative, progressive cities. The scope and peer cities were approved by the Audit Subcommittee and the seven-community-member Compensation Study Advisory Committee.

While the report indicates that every effort was made to obtain comparable data, not all information can be compared equally. Factors that contribute to this include differences in operating budgets, performance measurements, community priorities and scope of services, level of outsourcing, geography, and departmental organization. Additionally, a large part of the peer information used in this report is self-reported and un-audited.

The study documents that overall, Santa Monica’s pay and benefits are comparable to peer cities; this is notable, particularly given the scope and quality of the City’s services. The study also identifies areas for improvement, many of which are already in progress. Implementation of these improvements will play a significant role in the City’s efforts to maintain fiscal sustainability as it faces future statewide threats from rising pension costs.

There are 12 recommendations in the report that will help the City to improve its fiscal sustainability:

Enhance awareness and understanding of personnel costs by making this information readily accessible to the general public and provide explanations of each component of total compensation.

Develop and implement a formal compensation philosophy, including, but not limited to, compensation and benefits components, levels, and market competitiveness, to guide labor negotiations and set employee expectations with respect to compensation.

Evolve the in-house position-level compensation market study methodology to include medians and percentiles in accordance with best practices, accounting for labor relation requirements.

Continue to take steps whenever possible to mitigate the financial threat that pension liability places on the City.

Evaluate options to stabilize per-employee health care costs.

Consider staggering labor contracts and expanding the duration of all contracts to multiple years to reduce the burden of negotiations on the City.

Develop financial and operational strategies to prepare for possible future recessions, since the City may not be able to absorb a future recession as easily.

Explore strategies for mitigating personnel costs, such as hiring personnel at lower steps, and leveraging training programs to equip personnel to take on greater responsibility earlier in their career.

Implement an evaluation framework to assess the life cycle costs of proposed new programs and services, and evaluate outsourcing options, where applicable.

Conduct a staffing study to determine if additional firefighters are warranted to reduce the frequency of mandatory overtime.

The draft report provides substantive findings that both validate that we are not out of line among public agencies – and there are clear areas to improve. I welcome the report’s recommendations and look forward to working collaboratively with City Council, community members and our staff (and the labor organizations that represent the vast majority of our workforce) to implement the proposed reforms to sustain Santa Monica’s fiscal health for the next generation.